null

The online brokers have all reported their earnings for the second quarter of 2017. StockBrokers.com takes an in-depth look at the earnings reports from each of the publicly-traded brokers each quarter. While the 2016 earnings picture was a bright one for the industry, the first quarter of 2017 was very mixed. Here, we’ll look at how things turned out for the second quarter. We’ll look into each broker by starting with fast facts from the report and then a deeper look at their results. At the close of this post, we’ll summarize what all these reports mean for the online brokerage sector in general. Here is a look at the results from Interactive Brokers (IBKR), E*TRADE (ETFC), TD Ameritrade (AMTD), and Charles Schwab (SCHW).

Before we look at the individual reports, let’s look at how each company did on an earnings per share basis compared to the same quarter a year ago. Interactive Brokers brought in an adjusted 32 cents per share in the second quarter. That was 20% lower than their 40 cent profit a year ago. E*TRADE reported an adjusted profit of 52 cents per share compared to only 48 cents per share in the second quarter last year. TD Ameritrade brought in 44 cents per share on the bottom line. A year ago TD Ameritrade earned 45 cents. Charles Schwab earnings came in at 39 cents per share. Schwab earned just 30 cents per share in the second quarter last year.

The price war in the industry has been in the news quite a bit in the last few months. Let’s see if we can get a good look at how business is for the brokers.

Interactive Brokers Second Quarter Earnings Fast Facts

Interactive Brokers missed analysts estimates by a penny on the bottom line

Revenue came in far above analysts expectations at $387 million

Pre-tax margin dipped to 53 percent from 58 percent a year ago

Daily Average Revenue Trades (DARTs) were up 3 percent from last year to 669,000

Interactive Brokers narrowly missed on the bottom line and easily beat on the top line this quarter. It was once again a tail of two businesses for the company. The electronic brokerage segment reported some strong numbers in the second quarter. Net revenue rose eight percent in that segment. Total customer accounts were up 20 percent from last year, and customer equity rose an impressive 42 percent in the past year. Commissions revenue increased five percent from a year ago.

The market making business, which Interactive Brokers is gradually winding down, lost $24 million in the quarter. The low volatility in the market was largely to blame. Additionally, Interactive Brokers took a $22 million one-time exit cost as part of a write-down of exchange trading rights.

E*TRADE Second Quarter Earnings Fast Facts

E*TRADE easily beat analysts estimates of 48 cents per share by reporting 52 cents

Net revenue was $577 million which easily surpassed estimates of $555 million

Total DARTs jumped a whopping 37 percent to 208,205

Finished quarter with 5.3 million total customer accounts

E*TRADE delivered strong earnings in the second quarter. The online broker bested all analysts estimates. The jump in DARTs is the big story here, and it certainly contributed to the earnings beat. Net interest income jumped 24.5 percent largely due to higher interest income. Net interest margin rose to 2.74 percent as rates start to normalize a bit. Total customer assets were up 22 percent from a year ago.

The one downside in this report was expenses. Total non-interest expenses increased by 21.7 percent in the quarter. On the upside, E*TRADE continues to improve its balance sheet. Total delinquent loans dropped 19.4 percent from a year ago. Credit quality is definitely improving at E*TRADE.

TD Ameritrade Second Quarter Earnings Fast Facts

TD Ameritrade coasted past estimates of 41 cents by reporting 44 cents per share

New client assets of $22 billion in the quarter, which was 10 percent higher than last year

DARTs were up 10.5 percent from a year ago to 510,358

Commissions and transactions fees dipped 3.5 percent from last year

TD Ameritrade easily beat analysts estimates on both the top line and the bottom line. The company reported revenue of $931 million compared to analyst expectations of just $900 million. Total asset based revenues were up 21 percent to $573 million. That was largely due to investment product fees and higher insured deposit account fees. Net new client assets were up a whopping 61.8 percent from a year ago. Total client assets now sit at $882.4 billion, which is up 19.8 percent from last year.

CEO Tim Hockey said, “Investors remained broadly engaged, with strong trading volumes despite persistent low market volatility.” TD Ameritrade now has $2.9 billion in cash on its balance sheet.

Charles Schwab Second Quarter Earnings Fast Facts

Schwab reported 39 cents per share which matched analysts estimates

Net income rose 27 percent from the same quarter a year ago

Pre-tax profit margin rose to 42.7 percent from 39.4 percent last year

Total client assets of $3.04 trillion, up 16 percent from last year

Charles Schwab matched analysts expectations on both the top and bottom line. The net income figure of $575 million in the quarter was a record for Schwab. Notably, Schwab also said that net income for the first six months of 2017 are up 32 percent from the same period a year ago. Net new assets bought by new and existing clients jumped 142 percent from the second quarter a year ago to $64.5 billion. Schwab added 357,000 brokerage accounts in the second quarter.

Schwab did experience a 22 percent fall in trading revenues. That was the main drag on earnings in the second quarter. Asset management and administration fees were up 12 percent from last year. Also of note, new assets into proprietary equity and bond funds and ETFs held off the Schwab platform jumped 57 percent from a year ago.

Conclusion

Considering all the talk about the price war when it comes to commissions and fees, I consider this a fairly strong quarter for the online brokers. Sure, you can see signs of the trading fee revenue dips hurting earnings, but most of the brokers are doing a nice job diversifying their earnings picture. It certainly feels like the brokers all strategically navigated through the commission price war, despite its chaotic timing, and that has helped soften the blow. Additionally, it has to be considered a large positive for the industry that despite the low volatility, DARTs are strong across the board. You have to wonder if the decrease in commission fees has actually led some to trade more in the stock market.

All of the brokers continue to bring in new money at an impressive pace, and that’s clearly a very good long-term sign for the industry. We’re now in the slowest period of the year for the market, so it will be interesting to see how the brokers do in the third quarter.

Below is a yearly chart of all four of the brokers. The charts are as of the close of trading on July 25.